Very nice. I used this to experiment a little while I wait for your next version. I added a cannon to the Castle courtyard and found that I had the wrong behavior settings on it. (it used to be a tree) So instead of being a usable cannon, it was the cannon that stayed active and was shooting soap bubbles or something.
After correcting the bahavior setting, it acted like a normal cannon and I tried to use it to get on top of the castle. Unfortunatly invisible collision walls from the visible mesh are set up to prevent it.
It would be a cool hack/mod if some one found a way to merge the court yard with the castle grounds.
The only real thing holding that back perhaps is the object banks, and the door warps. Currently the doors don't show up in the editor and thus there is no way to edit where they go.
That and I don't know the poly count of the castle grounds and the court yard respectively. If they are combined it may exceed the poly count that the DS can handle. Though for the original game, I don't know why they made it separate from the castle grounds. It looked like the Nintendo 64 could have handled it fine judging from the vast landscapes from Zelda OOT and Majora's Mask.
Once this program matures some more, I may give that serious try sometime.
Also, I noticed I could place "paintings" inside the castle since they are objects (in Mario 64, they were part of the mesh and had warp settings but in Mario 64DS, they are placed as an object), but they don't behave as true painting in the since that I can't enter them. The one I placed in the middle of one of the rooms would ripple when I pass through it, but would not cause me to enter the level. I just passed through and nothing happened.
I guess it may be some time before the warps are figured out. I noticed in the screenshot above, you have a warps menu, so it looks like level warps are figured out. Warps from Painting figured out too perhaps?
Only time will tell.